WHAT ARE THE FACTOR INFLUENCING FOREIGN DIRECT INVESTMENT IN TANZANIA

WHAT ARE THE FACTOR INFLUENCING FOREIGN DIRECT INVESTMENT IN TANZANIA

ABSTRACT

This study examine the factors influencing foreign direct investment (FDI) for the case of Tanzania. The primary purpose of this study is to identify the factors affecting the FDI inflow in Tanzania, such as government terms and regulations, technology and infrastructure, and. The study also highlighted the significance and factors that lead to FDI. The main aim is to find the inflows of FDI in Tanzania and to identify these factors. On this study I will explain about three factors by explain their relationship among them and foreign direct investment, these factors are government terms and regulations, technology and infrastructures.

INTRODUCTION 

Foreign direct investment plays the significant role as a source of financing to a lot of developing countries (moosa, 2002). On this study I will explain significant factors influencing foreign direct investment in Tanzania, starting with explaining a key word which is foreign direct investment.

FOREIGN DIRECT INVESTMENT (FDI)

Is defined as cross border investment by a resident entity of one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy. This means company purchase capital and invest in foreign country. For example if china built a factory for making goods in Tanzania this would count as foreign direct investment. FDI has been explained by several researchers, the research conducted by Favianus M. Mahiti (2012) which reviewed the study of FDI in Africa in general shows that, “developing countries are increasingly aware of the role of FDI as an engine of growth in their economies. Foreign investors can contribute to growth by providing much needed capital and skills, by sharing risks in large projects and by serving as a vehicle for technology transfer. For many developing countries, FDI is mechanism by which to promote industries in which they have a potential comparative advantage that cannot otherwise be explained”.

FACTORS INFLUENCING FOREIGN DIRECT INVESTMENT - TANZANIA

GOVERNMENT TERMS AND REGULATIONS.

According to ( Tanzania investment centre, 2012) Tanzania offered a well balanced and competitive package of fiscal incentives in comparison with other African countries. Aiming at providing competitive fiscal regime on foreign trade, Tanzania has signed double taxation treaties with countries like Denmark, india, Italy, Norway, Sweden, kenya, Uganda, Zambia, and finland. And there are other countries in which negotiation is continue. Investment in Tanzania are guaranteed against nationalism and expropriation. Tanzania is a signatory of several multilateral and bilateral agreements on protecting and promoting of foreign investment. Among other international agreement and membership, Tanzania is a member of multilateral investment guarantee agency and international centre for settlements disputes. Furthermore there is availability of incentives for investment in Tanzania by investment Act (1997) has the more investment opportunity compared to its neighbouring countries. That is from those explanation it show that there is no significant relationship between government terms and regulations and inflow of foreign direct investment in Tanzania.

TECHNOLOGY AND INFRASTRUCTURE

Technology and innovation are the driving force for socio-economic development of human civilization. They have become major force towards gaining competitive advantages in many societies, Tanzania being one of them. technological development and the applications of information and communication development (ICT) as well as the use of energy source have created great opportunity for socio-economic development (msolla, 2009). Lack of inadequate technology has been a challenge in development of different sectors in the country that paving the way to foreign direct investment inflow in Tanzania. But MNCs has transferred economic technology to Tanzania, and hence attaining the succession of foreign direct investment inflow. Technology transformed the agriculture and mining economy in Tanzania by 75% of production by the application of automating machine which also minimize time and reducing the cost of production which also increasing the country revenue ( Tanzania investment centre, 1012). That is there is no significant relationship between technology and infrastructure and foreign direct investment in Tanzania.

CONCLUSION

The common consensus regarding foreign direct investment is it played important role on promoting the economic of developing countries. Hence policy makers of the developing countries are quite interested to know about the factors that have influence on foreign direct investment flows. Actually there are many factors that have influence either direct or indirect on foreign direct investment, such as; wages rate, lobour skills, tax rate, transport and infrastructure, political stability, size of economy and other factors.

REFERENCES

Mahiti, F. M. (2012). Determinants of Foreign Direct Investments in East Africa Countries of Tanzania and 

Kenya. Master Thesis, Mzumbe University.   

Manli J. M. (2012). The contribution of FDI in local economy. Tanzania Investment Centre, 

Moosa, I. A. (2002). The Determinants of Foreign Direct Investment in Mena Countries: An Extreme Bounds 

Analysis. Research Report, 1-13. 

Msolla, P. (2009). The Universal Communications Service Act Arrangement of Regulations, Communications 

Service Access Fund Regulations.   

Mudambi, R., Navarra, P., & Delios, A. (2013). Government regulation, corruption, and FDI. Asia Pacific 

Journal of Management, 30, 487-511. http://dx.doi.org/10.1007/s10490-012-9311-y